SYDNEY (REUTERS) - Australian business investment plunged by the most on record last quarter as firms slashed spending on plant and buildings, a surprisingly sharp blow to economic growth that sent the local dollar reeling.
Data on Thursday (nov 26) showed investment dived 9.2 per cent in the third quarter to A$31.4 billion (S$31.9 billion), more than three times the market forecast and the fourth straight quarter of declines.
The dismal report was a blow to hopes that economic growth rebounded strongly in the third quarter and a sign that interest rates may yet have to be cut again, albeit not in the short term.
Figures on gross domestic product (GDP) for the third quarter are due next week and analysts had been looking for a healthy rebound of around 0.8 per cent, thanks largely to a pick up in resource exports.
"You are likely to see some downwards revisions to GDP," said Ms Su-Lin Ong, a senior economist at RBC Capital Markets. "Weakness is across the board, in services and capex. Total planned spending looks largely unchanged since the last time. So these are still pretty soft numbers all around."
Mining investment is in near free fall after a decade of madcap expansion saw it quadruple to reach 8 per cent of Australia's A$1.6 trillion in annual GDP.
Spending by miners dived 10.4 per cent in the third quarter, on top of a 11.7 per cent drop the previous quarter.
The Australian dollar shed a third of a US cent on the weak report to hit US$0.7225. Interbank futures were little moved as the Reserve Bank of Australia (RBA) has recently cast doubt on the need for further easing, with rates already at record lows of 2 per cent.
Just this week, RBA governor Glenn Stevens laid out a laundry list of improving indicators and questioned whether another cut would be the most effective way to aid the economy.
The one bright sport in the data was that firms outside of mining did upgrade their spending plans for the finiancial year to end June 2016. The Australian Bureau of Statistics found total spending was now projected at A$120.4 billion, up from A$115.7 billion three months earlier.